Rather than pool IDs in a central database, the initiative relies on a distributed database run by trusted parties spread across the blockchain. You don't have to worry about a sole gatekeeper holding the keys to your life, or risk losing access because you've traveled to another country. And while it relies on biometrics (such as fingerprints and iris scans) for authentication, any personally identifying info is purposefully kept off the chain and exposed only when you grant access.
The digital IDs are part of ID2020, a public-private partnership pushing the UN's 2030 Sustainable Development goal of giving every human an official identity. It could be a long while before these IDs are available, let alone in use by many undocumented people. With that said, it could represent a major breakthrough if it works as promised. So long as they get themselves into the system, refugees would be more likely to receive aid wherever they are. Those with relatively stable lives, meanwhile, could take advantage of government and financial services that were previously off-limits.
This is just one part of a larger solution. There have to be guarantees that digital ID holders will get the services they need, which is as much of a political challenge as it is technical. Provided everything falls into place, though, it could help many people get started on a better life.